The impact of HVCC legislation on US real estate market

The US economy is facing the worst recession in present times. The principal reason behind this recession is the collapse of mortgage industries and real estate market since 2006. However, the recession is not restricted only to the US real estate market but it has affected the overall economy of the nation. In this regard, HVCC (Home Valuation Code of Conduct) legislation is a special mention.

Why the real estate industry needs HVCC

The primary aim of HVCC legislation is to prevent the possibility of both mortgage and real estate brokers to influence appraisers in order to provide relatively much higher values for appraised properties. Both AMCs (Appraisal Management Companies) and independent appraisers conspire with mortgage brokers to provide inflated appraisals in return for more commission and more lucrative business in future. However, it is quite easy to check whether or not the appraised value is appropriate. The values can be verified by simply checking the information (about amenities, neighborhood, conditions and locality of the property that determines the appraised value) in the computer.

Provisions of HVCC regulation

The HVCC legislation came into effect on 1st May, 2009. According to the law, if appraisers want to work with AMCs, they cannot interact with mortgage brokers. AMCs are supposed to assign the appraisals on both first come first served and rotation basis without considering the appraiser’s experience. Due to this, the appraisers are expected to loose about 40-60% of their income as they’re not supposed to work independently.

Impact of HVCC legislation

The impact of HVCC legislation is not restricted only to US real estate appraisers. NAR (National Association of Realtors) conducted a survey to measure the impact of HVCC legislation. Some important findings of the survey are summarized in the following lines.

  • There has been an increase in the time to obtain a complete appraisal.
  • About 85% of NAR appraiser members reported a notable reduction in the quality of appraisal.
  • 70% of NAR appraisers have reported that consumers are paying higher fees for getting their property appraised.

HVCC regulation is benefiting consumers as they are saved from inflated home values, which also protects them from being stuck in an overestimated property. However, it is taking much longer time to finish a property transaction, which is often canceling a deal. Therefore, the legislation, which is meant to protect consumer interest, is actually crippling the real estate industry. Therefore, HVCC legislation needs to be reconsidered so that it can have more positive effect on US real estate market.

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